Apple has initiated a new mandate for apps entering its China App Store. Starting last Friday, the company requires that all new apps provide evidence of a government license, responding to Beijing's strengthened regulations on online content.
This move by the Cupertino, California-based technology firm entails that developers are to submit an “internet content provider (ICP) filing” if they wish to introduce a new application to its China App Store.
The necessity of an ICP filing is not a new concept in China. It is an essential registration for websites that intend to function legally within the nation's borders. To put this into context, Apple's contemporaries, including Huawei, have incorporated this measure into their operations as far back as 2017.
The intricacies of the new directive, unveiled in August, dictate that app creators need to establish their affiliation with a company based in China or be associated with a registered entity within the country. This is to ensure that they are in full compliance with local laws and guidelines.
A report from The Wall Street Journal on September 29 shed light on meetings between Apple executives and Chinese officials in the preceding months. The discourse focused on the expectation from the Chinese side for Apple to implement application regulations diligently. One of the primary motivations behind this stringent regulation is to curb issues like online scams, unauthorized distribution of adult content, and the dissemination of content that does not align with China's robust censorship norms.
Historically, despite Beijing's consistent efforts to regulate Western social media entities, many of these platforms remained accessible via different app stores. The current regulations could potentially influence the availability and functionality of various Western applications, such as WhatsApp and Facebook, among others, in China. As it stands, Chinese users have been employing virtual private networks (VPNs) as a workaround to bypass China's extensive internet censorship mechanism, often referred to as the “Great Firewall.” With the new rules, the Chinese government appears to be making strides towards addressing this bypass method.
A significant implication of this regulatory change pertains to Apple's App Store offerings in China. Presently, the store lists over 1,000 foreign apps that have not registered as per the new guidelines. To be in complete alignment with the updated regulations, Apple might have to delist these apps. The ramifications of such a move could extend to Apple's revenue streams. By offering a more extensive app repertoire than its local competitors, Apple currently enjoys a competitive edge. However, adherence to the new rules might alter this scenario.
To understand the potential impact on Apple's financials, one must consider the magnitude of its operations in China. As of the last reported quarter, China emerged as Apple's third-largest market. The region contributed $15.7 billion to Apple's overall revenue, which stood at $81.8 billion for that period. The introduction of these regulations and Apple's subsequent compliance could influence the dynamics of its operations in the Chinese market.